WalesWatch — the IWA blog
How much more wealthy have we become in Wales?
Eurfyl ap Gwilym considers how to gauge wealth in Wales:
John Osmond’s report of the First Minister’s claim ‘that measuring Welsh prosperity is permanently off the radar’ raises some important issues. The First Minister reportedly also claimed that ‘Wales was 50 per cent better off than ten years ago’. It is not clear on what basis this claim was being made.It is to be hoped that it was not based on Gross Value Added (GVA) per capita which has increased by 45 per cent between 1999 and 2007 (ONS: Regional Accounts. December 2008). Such a claim would be rather disingenuous because it uses nominal GVA which ignores inflation. Correcting for the impact of inflation (22 per cent between 1999 and 2007 using the GDP deflator), over the last decade GVA per capita in Wales has grown in real terms by a total of 19 per cent or approximately 1.7 per cent per annum compared with 2.2 per cent for the UK. Growth of GVA per capita in Wales was the lowest of any country or region in the UK with the exception of the West Midlands of England. Perhaps the First Minister was using Gross Domestic Household Income (GDHI) as his measure which corresponds broadly to household income after deduction of tax and addition of benefits. GDHI is not, of course, a measure of economic performance or success. Furthermore Wales has the third lowest GDHI per capita of any country or region of the UK and real growth over the last decade has been far short of 50 per cent.
No one would claim that GVA is a perfect measure but it is accepted internationally as the best measure of wealth creation. If we are effectively to address the economic challenge we need first to recognise reality. It would be more convincing to propose other measures of economic progress and social wellbeing if firstly our disappointing economic performance was recognised and a serious attempt made first to analyse the causes and then to devise programmes to address them.
We know for example that whilst the compensation of employees component of GVA in Wales (approximately 62 per cent of total GVA) has declined only slightly compared with the UK as a whole over the last decade there has been a serious and much more material drop in the operating surplus/ mixed income component (38 percent of the total) which is dominated by profits earned (31 per cent). The reasons for this sharp decline in profits needs to be identified: it may, for example, be due to a shift from capital intensive manufacturing and process industries to lower value added retail activities. We need to identify the causes. If this were done the First Minister could then go on to propose other measures in addition to GVA to assess the success of the Welsh economy on a sound evidential basis.
Dr Eurfyl ap Gwilym is an IWA trustee.
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Search for a Welsh Broadcasting Lifebelt
Geraint Talfan Davies assesses the significance of the Assembly Government’s new review of creative industries in WalesThe work to avert a crisis in broadcasting in Wales took another twist yesterday when the Assembly Government announced its response to the report on broadcasting by the Assembly’s Communities and Culture Committee.
The response confirmed the committee’s concerns, reaffirmed the Assembly Government’s backing for the concept of a Welsh Media Commission, and also set up a review of the creative industries to be conducted by the former Ofcom board member, Ian Hargreaves. A review of the creative industries in Wales has been on the cards since before the last Assembly elections. However, Lord Carter’s Digital Britain report has given it a new urgency.
It is almost certainly a recognition of the fact that, if the UK Government continues to refuse to intervene to support general programming for Wales, unlike their declared support for sustaining a news competitor to BBC Wales, the Assembly Government may have to dip into existing pots of its own money to avert a total collapse.
Effective collaboration between departments has not been a notable feature of Assembly Government working, especially between the heritage and economic development portfolios, so this joint review is something of a breakthrough.
Hargreaves is being asked to take an overview of several pots that are now distributed between the Heritage and Economic Development Departments: under Heritage, the Film Agency whose production fund is drawn from the Arts Council’s lottery fund, and under economic development, the £7m Creative IP fund that has supported several film and television projects. There is also the financial assistance given by Heritage to community radio and to Welsh language online journalism.
He will also want to look at whether we are maximising the possible synergies between our broadcasters and both the arts and the film business, and whether the financial assistance to the creative industries is on a par with that available for innovation in manufacturing.
Few people are better placed than Hargreaves to carry out the survey. He has an incisive mind and knows Ofcom, as a board member and senior executive, and the UK Government, from the inside. He is a close friend of the Foreign Secretary, David Miliband, and the Assembly Government had to work hard to negotiate his temporary release from his current position as Director of Strategic Communications for the Foreign Office. That they managed to secure him in a considerable coup.
He also knows Wales. He and his family live in Penarth and have another home in Pembrokeshire. In the late 1990s he headed the School of Journalism at Cardiff University. Most important of all, he is not afraid of radical ideas, including devolution, and my guess is that his recommendations may challenge us all.
• Geraint Talfan Davies is Chair of the IWA.
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Broadcasting Battle Enters Final Straight
Geraint Talfan Davies calls for a campaign against the failure of the Westminster Government’s Digital Britain report to respond to Welsh needsWales could see the revival of a campaign for a better broadcasting deal following a meeting this week (28 July 2009) arranged jointly by the Institute of Welsh Affairs and TAC, the umbrella body for Welsh independent producers and held at Cardiff University’s School of Journalism.
The meeting was called to debate the proposals for public service broadcasting put forward in Digital Britain, the report from the Communications Minister, Lord Carter. It underlined the widespread concern in Wales at the shrinking English language programme service for Wales, as ITV Wales’s output collapses and BBC Wales is faced with deep cuts.
It was addressed by Professor Justin Lewis, head of the School of Journalism, Julie Barton, a former editor of BBC Radio Wales and a member of Ofcom’s advisory committee for Wales, and myself.
Following ITV’s insistent withdrawal from its traditional public service obligations Lord Carter has proposed that news on ITV be provided by independently financed news consortia (IFNCs). Aided by public money, these would bid to provide a news service that would be shown in the familiar slots on ITV. The Government intends to run three pilots during 2010 – in Wales, Scotland, and a region of England.
This sounds very simple. However, it hides a long list of questions that we should be asking publicly, for the concept of a pilot may be misleading for us in Wales. Potential bidders are already asking for more security than a two-year contract. The chances are that if we get it wrong we will have to live with the result for a very long time.
A first order question is, what want kind of news service is it to be – a continuation of the status quo or something better? It raises questions about all news provision, print, broadcast and online and suggests that there is scope for a significant academic study that the Cardiff School of Journalism would be well equipped to carry out. We desperately need some objective, external baseline evaluation.
Then there are issues of what criteria should be adopted to choose these consortia? More importantly, will the process be a beauty contest or an auction? Let’s not forget that the disastrous ITV franchise auction in 1990 – the beginning of the end of the ITV system – employed a quality threshold. Yet it was of no use when it came to the crunch. HTV’s £21m per annum winning bid proved a fatal millstone for the company.
In licensing radio stations, the Radio Authority - of which I was a member - employed criteria quite similar to those suggested by Carter, but I confess that more often than not, the financial stamina requirement prevailed over editorial ambition.
How much competition is there likely to be? The Digital Britain report seems fairly clear that the Government would be looking for organisations with a track record in delivering news and current affairs.
Within Welsh television that does not produce a long list. The existing ITV Wales news team could be taken over by any one of three possible players:
• Trinity Mirror newspapers, owners of Media Wales and the Western Mail
• The Guardian Media Group that owns Real Radio with a footprint that now covers most of Wales.
• Tinopolis, our largest independent company that from its base in Llanelli delivers daily magazine programmes in Welsh for S4C.
Possibly there could be a combination of any of these. It is not difficult to envisage ITV Wales coming from the Western Mail’s new home, a multi-media production centre recently opened by Media Wales. Outside Wales Sky, Reuters, ITN or even the Daily Telegraph with its Telegraph TV might also show an interest.
A major question that was debated at this week’s meeting was who will decide these issues. More particularly, will the issue be decided in London or will the decision be taken in Wales? The DCMS’s consultation document on funding IFNCs concedes that “it will be important that the award and management of IFNC contracts is carried out objectively and independently of Government, in order to ensure that editorial independence is guaranteed.” It further suggests that it “could involve one or more existing institutions or a new body” (my italics).
The two obvious existing bodies are Ofcom and S4C. Ofcom – the odds on favourite - would provide a sharing of experience across the three pilots. However, it would need to draw much more heavily on Welsh input that it has been willing to do in the past. One option could be a core panel, augmented for each of the pilots by an equal or greater number drawn from each of the nations depending on which was under consideration.
S4C’s offer to be the tendering agent would have merit if that were a task and finish job. At the same time these contracts would need ongoing management and scrutiny, which would give S4C a continuing role in the management of a key element in English language broadcasting. Unless it can bring itself to face the implications of that for its own governance, its proposal will likely fall.
The dominant Welsh view that it would be best left to a new Welsh Media Commission, has not found favour yet with Government, unless you construe the DCMS consultation document reference to ‘a new body’ in that light. Lord Carter did not mention the Commission idea at all in his main report. If you are an obsessive you will find a rather inadequate, not to say misleading appraisal of it in an ‘impact assessment’ on the DCMS website.This is hardly the treatment that a proposal backed by the Assembly Government, the Welsh Heritage Minister and the National Assembly’s Culture and Communities Committee deserves.
Another unaddressed concern in the Carter report is general programming for the nations – an issue that has been a primary focus in every study of this subject in Wales, by the Assembly Government, Assembly Committees and even Parliament’s Welsh Affairs Committee. Again, Carter does not refer to it at all, or perhaps only by inference. Carter’s case for this sidestep is best encapsulated in Chapter 5 para. 11:
“In an era of limited funding it is critical to distinguish between where plurality is desirable and where it is essential and to focus public intervention on the latter.”
The implication is that general programming for Wales in the English language is desirable but not essential and therefore undeserving of public support. No evidence, plea or argument can seem to get him past this point.
This is not entirely surprising, since the underlying reality of Digital Britain is that Carter regards the UK as a single, homogenous cultural space. A passing reference may be made to S4C’s proposal in Wales or to the Scottish Broadcasting Commission’s work in Scotland, but the report’s technique for dealing with specific issues raised in Wales or Scotland is mainly to ignore them altogether.
The only glimmer of hope is that in the DCMS’s parallel consultation document on ‘independent and impartial news’, in the section on funding which discusses making use of the digital switchover element of the licence fee, it says,
“… it could also potentially be used to sustain other essential public service content priorities (e.g. the provision of plural original content for children) if the independent provision of Nations, local and regional news requires less than the contestable sum set aside.”
This is the door, left most marginally ajar, that Wales now needs to push open. After all, indigenously-produced content for the Welsh audience in the English language is no less important than indigenously produced content for children.
In fact, English language programmes for Wales have been under the very same market failure pressures that Carter lists as adversely affecting children’s programmes: re-focused public service broadcasting requirements, increased commercial pressures, changes to how people consume, and less than 20 per cent of output being indigenously produced.
If having only one hour in five of children’s programmes produced within the UK is a market failure, why is having one hour in a hundred of general programmes produced in and for the majority audience in Wales not a similar failure?
The next weeks are going to be crucial.
• Geraint Talfan Davies is Chair of the IWA.
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Measuring Wealth and Poverty
John Osmond on how the First Minister is putting faith in the Assembly Government's new Foundation Phase early years education curriculum to tackle child povertyFirst Minister Rhodri Morgan signalled today that bringing Wales’s economic output per head up to the UK average, a major objective at the start of devolution a decade ago, is permanently off the radar.He declared that measuring Wales prosperity on the basis of comparative average GVA (gross value added) across the UK was a meaningless exercise, because it did not compare like with like. It did not take into account difference in population structures, such as numbers of retired and older people, children, the economically inactive, and cost of living differences from one region and another. Speaking at a Cardiff seminar to launch a Rowntree Foundation report on Understanding attitudes to tackling economic inequality the First Minister said the fact was that, despite its GVA declining in relative terms compared with the UK as a whole, Wales was 50 pr cent better off than ten years ago.
“GVA is not a good measure” he said. “We only cling on to it because it is the standard used across the European Union to calculate eligibility for Convergence Funding, and of course we in Wales benefit from that.”
During the first year of devolution the Assembly Government’s declared aim was to increase the Welsh GVA from 77 per cent to 90 per cent of the UK average within a decade. However, it very soon abandoned this objective and our GVA has actually declined to 75 per cent in 2007 (the latest year for publication of the statistics) – that is, a full 25 per cent below the UK average.
Rhodri Morgan said he would like to see a better measure of comparability based on factors such as sustainability and quality of life. However, he did not see such measurements emerging to replace GVA for at least 20 to 30 years because Wales had to be able to put forward comparable statistics in the international context, especially in relation to the European Union and United Nations.
He said the Assembly Government’s flagship policy for reducing child poverty was its new Foundation phase curriculum for thee to seven-year-olds, which was introducing a Scandinavian-style play-based education curriculum for the early years. This was designed to tackle the situation which, as he put it, under the previous nursery education system, “dull middle class children” overtook “bright working class children” by the time they were six.
“The learning through play model is an attempt to break this cycle, and provide working class children with a sense of confidence and engagement to take with them through the rest of their education. In the long-term I believe the pay off will be bigger than anything else we can do, even in terms of taxation.”
• John Osmond is Director of the IWA.
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Victory from defeat
John Osmond takes a look at a new book examining the 1984-05 Miners Strike a quarter of a century ago that, he says, illuminates the struggles of contemporary Wales. Most who lived through the 1984-5 strike will recall feeling how even at the time it felt like a momentous event. With hindsight it can be seen as the hinge of a pivotal decade in Welsh history that opened the door between the 1979 and 1997 devolution referendums. This is certainly the view of Hywel Francis whose important new book, History on our Side: Wales and the 1984-5 Miners’ Strike, marks the event’s 25th anniversary. The book not only chronicles what was for him an intensely personal struggle, but also casts his historian’s eye over its centrality in any understanding of contemporary Welsh politics and society.For in those hot summer months of 1984 and through the cold, grim winter that followed can be seen the stirrings of Wales as a political nation. Following the divisions of the 1960s and 1970s that culminated in the referendum defeat of 1979, many had concluded that this was a lost cause. However, 1984-5 brought a different kind of defeat, one which persuaded many Welsh people that ultimately they could only rely on their own resources and those of their communities. This was a hard lesson, dearly paid for, but it opened the way to the making of a different kind of Wales whose shape is being forged now, in the early decades of the 21st Century.
Hywel Francis, MP for Aberavon, is well placed to make this judgement. He was the first of five generations on both sides of his family not ‘to go underground’, as he puts it. His father, Dai Francis was the general secretary of the South Wales Area of the NUM in the 1970s and first chair of the Wales TUC. Along with Dai Smith in 1980 he produced the seminal account of the miner’s union, The Fed: A History of the South Wales Miners in the 20th Century. And in March 1984, on the cusp of the strike, he launched Miners Against Fascism: Wales and the Spanish Civil War. But more important than all of these qualifications from the point of view of the story told here, Hywel, along with his wife Mair, was centrally involved in the 1984-05 strike. They led local support groups in Crynant and Onllwyn which with others across the coalfield and, eventually, the whole of Wales and beyond, combined in the course of the struggle to create the Wales Congress in Support of Miners’ Communities which Hywel Francis chaired. As he says, “The Congress was born out of a realisation by large sections of the Welsh people that miners were struggling for the future of Wales”, captured at the time by the slogan ‘The NUM fights for Wales’.
But that notion only emerged about halfway through the strike. To begin with, in a supreme, breathtaking effort of persuasion by picketing, the south Wales miners became the spearhead of a British NUM lance to ensure solidarity with the strike across the English coalfields. An estimated four to five thousand south Wales miners (about 25 per cent of the workforce) were permanently mobilised throughout the coalfields of Lancashire, Nottingham, South Derby, Leicester, Stafford and north Wales. They were also picketing 26 nuclear, coal and oil power stations and manning six regional centres in England. Commanded like a military operation from the NUM’s Area Headquarters in Pontypridd, the insurgency cost more than £1 million in the first six weeks alone.
The effort was doomed. Because of Arthur Scargill’s failure to allow a ballot the miners were split and on the backfoot from a moral point of view from the start, and, of course, Mrs Thatcher’s government was well prepared. But the important question for the future was how the south Wales miners responded when it became clear that they could not rely on the richer coalfields of the English Midlands and Yorkshire where many miners continued to work under the banner of a breakaway union. They looked inwards and set about ensuring, as far as they could, the survival of their families and communities and ultimately the NUM itself.
In the process they created an extraordinary network of support groups and forged, as Hywel Frances recounts, a new style of politics. This was one essentially led by women who were at the heart of the support groups that sprung up in every village and town in the south, and eventually across the whole of Wales. This became, for a time, a powerful national movement, involving Labour and Plaid Cymru, the churches, the Wales TUC, Cymdeithas yr Iaith, peace, women’s support, lesbian and gay groups and others. Even Neil Kinnock, agonising as Labour leader over his inability to support the strike because of the absence of a ballot, became a supporter of the Wales Congress.
Hywel Francis tells the story of the various phases of the shrike well, but he is at his most interesting when he deals with the aftermath and the impact of defeat. The title of his book comes from the words of a miner at Tower colliery in June 1984 who said to him, “Surely we can’t lose, history is on our side.” Normally, history is on the side of the victor. But in this case something extraordinary happened. Despite the rapid closure of what remained of the south Wales coalfield in the wake of the strike, defeat was turned into a kind of victory. This was symbolised by Tower colliery resisting the coal privatisation of the 1990s and surviving as the last deep mine in Wales as a result of a worker’s buy-out.
More fundamentally, however, for many Welsh people the experience of living through the strike demonstrated the possibilities and life-enhancing qualities of community solidarity, of connecting class with nation, and of forging a new kind of nation in the process. For himself Hywel Francis describes it as “a personal and political watershed”. And so it proved for the Wales as a whole. As Dafydd Elis-Thomas, Presiding Officer in the National Assembly put it, speaking at an ‘Evolution of Devolution’ conference organised by the Bevan Foundation in November 2008, “That was when it all began.”
• John Osmond is Director of the IWA. History on our Side: Wales and the 1984-05 Miners’ Strike is available from the Iconau imprint at £9.99.
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Railway upgrade - just how electrifying for Wales?
The Great Western Railway electrification is to be welcomed, says Rhys David, but some vital questions remain
The proposal to electrify the main line between London and Swansea is possibly the best news Wales is going to receive all year – and not least the decision to proceed all the way to Swansea rather than stopping short at Cardiff. So congratulations are due to Andrew Adonis for seeing what a succession of Transport Ministers have failed to recognise – that there was little sense in sticking with diesel trains that cost more to run and maintain and are less environmentally sustainable than the electric counterparts that most advanced, and some not so advanced countries, have made the backbone of their railway networks.But, before we start thinking of the names we will give these new trains and of sub-two hour journeys to Paddington before the end of the next decade, it is worth tempering enthusiasm with realism. Firstly, and here the hand of Welsh Secretary Peter Hain is possibly to be observed, the announcement, timed to coincide with the first Cabinet meeting in Wales, is politically very astute coming within a year of the next election. It reflects well on Labour - and even on its One Wales partner, Plaid Cymru, which pressed for the Swansea link – and unless they can come in enthusiastically behind it, puts the Conservatives in a spot. As such, it has to be seen in part as an attempt to shore up Labour’s weak current position in Wales and to paint the party as the only one that would invest in Wales.
But will it get built to timetable and to its full extent or will it join the many other transport and other projects which inevitably get trimmed back as cost and other considerations begin to bear down? In the same week as the announcement we have seen the cancellation of the M4 relief road around Newport and the new link to Cardiff airport (though railway electrification may indeed be a better use of resources than either of those schemes). Other important infrastructure projects also remain uncompleted years after conception, including Cardiff’s eastern distributor, the latter seeming likely to join Cardiff’s Eastern Avenue in not being built until decades after its Western counterpart.
The Conservatives in their initial reactions have, as might be expected, suggested there are severe flaws in the way in which Network Rail will be funded to carry out the scheme and at a time when big reductions in public expenditure are likely to be mandatory for whichever party takes power next June or earlier after the election, it is hard to see the GWR scheme escaping scrutiny. The Institute of Fiscal Studies predicted only this week that spending cuts of more than 16 per cent will be needed in other areas – including presumably transport - if the two main parties stick to a promise to ring fence spending on schools, health and defence. Even if it proceeds, the cost-benefit ratio not just of the whole scheme but of its parts is bound to be looked at until the day it is finished.
This it would seem is where politicians, industrialists, and other interested parties in Wales will have to be very vigilant. Paydirt will come not from the 70 odd miles of GWR electrification stretching into Wales but from the 100 miles into Bristol. Indeed, at first the suggestion was that the line would only be electrified to Bristol, which, because of its significance as a financial, commercial and high technology centre, generates much higher business traffic than south Wales.
So, we do now need to know very clearly how the scheme will be phased and which sections will be built first. Will it start at Paddington and work its way westwards and will it push into Bristol before it gets to Wales? Will separate sections along the 200 mile stretch be under way at the same time? Will it open as one stretch or in sections and what sort of services will be provided on the unopened sections? Just how vulnerable to delays in completion will the Welsh stretch be, particularly given the complications likely to arise from electrifying the 1870s Severn Tunnel with its requirement to pump away millions of gallons of surplus water every day?
Questions have already been raised about what will happen when the Severn Tunnel is closed (as it regularly is on weekends and Bank Holidays) for maintenance and diversions have to take place on the not-to-be-electrified Severn Tunnel Junction-Gloucester-Swindon section. Some of what are called bi-mode trains capable of using diesel or electricity as fuel will be used to take passengers on services to Carmarthen and beyond from London but it seems unlikely that enough of these trains will be available to maintain a full Swansea/Cardiff/Newport – London service when the tunnel is closed. Do we actually need a new railway bridge across the Severn Estuary and how much would that cost?
As soon as some of these details are known it will be time to ask some other questions about the employment spin-offs that could be generated from the work. The locomotives themselves will have to be acquired from one of the big electrical engineering giants of the world, probably Hitachi, but how much of the work will be carried out in Japan? And what about the trackside equipment? The size of the contracts suggests Network Rail will be in a strong position to demand the setting up of some manufacturing facilities in the UK, whichever firms are chosen, as well as the use of UK companies as sub-contractors. How much of this work can be steered to Wales? Where will the maintenance facilities be sited? At present the main work on GWR’s diesel trains is carried out in Bristol. Can Wales get a bigger share of whatever work needs to be carried out regularly on the new trains?
As ever, the announcement is only the start of the journey everyone who wants to see this scheme come to fruition will have to embark on.
Rhys David is an IWA Trustee and former Financial Times journalist.
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Getting climate change message across
John Osmond hears veteran campaigner Jonathan Porritt deliver an American message to Welsh environmentalists Our politicians should take a leaf out of President Obama’s book when it comes to selling measures to reduce carbon emissions and combat climate change, according to Jonathan Porritt, outgoing Chair of the Sustainable Development Commission. On a swing through Wales during a UK farewell tour after ten years in post Porritt, charismatic campaigner on all things green, spoke to an admiring audience of fellow campaigners, NGO activists, and others of the committed in Cardiff’s City Hall. His main message was that they weren’t getting their message across. This was because they were focusing on the apocalyptic ‘end of life as we know it’ dimension of the impact of climate change, rather than emphasising upbeat possibilities around adjusting to it. The Sustainable Development Commission acts as a ‘critical friend’ to the UK and devolved governments, producing detailed assessments of the impact of policies across the silos of government departments. It created controversy in Wales last year when – to the dismay of many Welsh environmentalists, especially in the RSPB - it gave a guarded welcome to the notion of a Barrage across the Severn as a source of green electricity.
Today Porritt said he had been forcibly struck by Obama’s approach when selling his carbon reduction plans to the American Congress. “First he spoke about energy security. It was vital in America’s national interest that they become less dependent on outside sources of oil, especially from the Middle East.
“No-one could disagree with that.
“Second Obama spoke about the jobs that would be created by moving the economy in a green direction. New industries, new factories in all parts of the United States – on a massive scale.
“Then he spoke about the research and development possibilities of investing in innovative approaches to generating energy from renewable sources, opportunities for at MIT, Berkeley and other leading Universities around the country.
“Only then did he mention climate change and the targets that would be met in reducing carbon emissions by all these activities. And for good measure he added that all this would mean the United States would be leading the world in tackling climate change – failing of course to acknowledge that America has led the world in getting us into the climate crisis in the first place.
“But it was upbeat, persuasive and above all smart.”
On the other hand the British Government’s approach was to begin by setting out the dire consequences of failing to adjust to climate change. The severe weather patterns that would result in floods, deaths caused by heat waves, water shortages, and backwashes into Britain from mass migrations from other parts of the world. All this was correct but not smart, Porritt said, and designed to stop people listening.
But he praised the British Government’s commitments to reducing our carbon footprint, recently outlined in the Climate Change. The important thing was that all three major parties were signed up to the agenda – a global first.
Porritt was asked whether the Government could be regarded as serious about facing up to the challenge when it was also committed to a third runway at Heathrow and had made clear that cheap flights for generally middle class passengers would remain untouched. He replied that he believed Ministers were moving in the right direction. “For instance, if the decision were being made on Heathrow today, I don’t think it would be the same.
“Gordon Brown has come a long way in the two years he has been Prime Minister. Up to that point climate change had been Tony Blair’s thing and because of that didn’t give it much attention. But I’ve watched him develop over the past 18 months into a man who is getting his head around this issue big time. At the G8 summit last week he laid out an understanding and grasp of the scene that could easily have been Blair’s.”
Porritt said that when he steps down from the Commission in a few weeks he will be concentrating on working with the Forum for the Future environmental ‘think tank’ he co-founded, and devoting more time to campaigning on PR and civil rights issues. “I’ve become convinced that the sclerotic governance system we have in the UK is the source of many of our problems,” he said. “I’m particularly worried about the way the UK government has used the threat of terrorism to undermine human rights, dissent and the right to protest.
“All this feels different in Wales and Scotland, where devolution has let some air into the system. Proportional representation in Welsh and Scottish elections has allowed the smaller parties a voice and you have a sense of greater engagement. In Whitehall, by contrast the place is half dead. In Wales and Scotland you feel that the structures are allowing some energy to get into the system. In Whitehall the system is simply killing off the energy we need.”
Porritt who remains a member of the Green Party which he once chaired, added, “The simple and unavoidable fact is that the mainstream parties still remain wedded to consumption-driven economic growth which is simply unsustainable.”
John Osmond is Director of the IWA.
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Losing out to Barnett
John Osmond looks at the way Labour Secretaries of State have been promoting Welsh interests in WhitehallThe mounting reports all agreeing that the Barnett system for calculating the Assembly Government’s block grant has been short-changing Wales, and should be scrapped and replaced with a system that recognises need, is proving embarrassing for the most recent Secretaries of State for Wales.They are wriggling on a hook of the question, if the 30-year-old Barnett has been so bad for Wales, especially over the last 12 years of Labour in office at Westminster, why haven’t they been more pro-active in pressing for a change to the system? The present Secretary of State for Wales, Peter Hain, responded to this question over the weekend by denying that Wales had lost out. He claimed last week’s report by the expert Holtham Commission, set up by the Assembly Government, had concluded that up to now the system had been broadly fair to Wales. At the same time he agreed that it looked as though Wales would lose out in future and that, as a result, the Barnett formula, which crudely allocates money on the basis of a head count, would have to be “revisited”.
Yet this response, given in an interview with Radio Wales, simply ignored that the Holtham Commission calculated that Wales was currently losing out by £300 million a year and many observers believe that the figure is much higher.
Meanwhile, the minutes of evidence of last week’s high-powered report into the Barnett formula by the House of Lords Committee chaired by Lord Richard, finds his predecessor as Secretary of State for Wales, Paul Murphy, having a tough time claiming that the Barnett formula was actually the best solution for Wales. On 1 April this year, responding to a question from Lord Richard, he declared:
“Over 12 years on and off I have lived with this Formula and, although there have been ups and downs, I cannot think of a better one.. I suppose we will come later on to the detailed question of needs formula, but I think it has met the needs, certainly in terms of the country I represent around the Cabinet table … My job is to ensure we get the best possible deal for those territories and countries that we represent around the table [he was accompanied by the Secretaries of State for Scotland and Northern Ireland], and certainly from the Devolved Administrations’ point of view, they have done pretty well out of the system.”
To this Lord Richard responded:
“I do not think that is the view of the administration in Cardiff, if I may say so. We went to Cardiff and took some evidence down there. It was very difficult to find anybody saying an enthusiastic word for the existing Barnett formula and the general feeling there seemed to be that a fairer system was capable of being developed and it would be more equitable were it to be introduced.” John Osmond is Director of the IWA.
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IWA west Wales branch visit to Bluestone
The west Wales branch visited Bluestone Leisure village in Pembrokeshire for their June meeting to understand the impact of the development on the west Wales economy over the first year of its operation.£61m has been spent on the development to date, making it the largest public-private partnership in Wales. Attracting new visitors to Pembrokeshire has always been central to the vision of Bluestone – a promise appears to have been fulfilled, with 44 per cent of visitors to-date coming to the county for the first time.
Over a third of visitors travel for more than four hours to reach Bluestone, with 51 per cent classified as 'wealthy achievers', bringing significant spending power into the region. This spend is spread around the area, with about 56 per cent leaving the site during the stay.
Currently Bluestone employs over 350 people, 98% from the local area, giving an economic value of £5 million from the jobs alone. 600 suppliers are involved in servicing the village, with 50% being from Wales and 41% from within Pembrokeshire. In terms of the food supplied in the restaurants, bars and shops 845 comes from Wales, with 65% from within Pembrokeshire. Even an element of the energy is purchased locally with Pembrokeshire Bio Energy supplying the heat to the Blue Lagoon. The whole operation has received a Green Dragon level 3 for its environmental management, with the target of achieving the highest grade 5 rating by 2009.
Peter Davies is the IWA's West Wales branch chair.
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Lords say Barnett is 'arbitrary and unfair'
Eurfyl ap Gwilym on the implications of the Lords' report into the Barnett formula:
Hard on the heels of the first report of the Holtham Commission on funding devolved government in Wales, which was published on July 7, the House of Lords Committee on the Barnett Formula published its report on July 17.The two committees offer contrasting but essentially complementary reports. The Holtham Commission was concerned essentially with the position of Wales within the UK but will, in its two reports, look both at the current funding arrangements through the Barnett mechanism and also taxation and borrowing powers. The House of Lords remit was limited to the Barnett Formula and its possible replacement but covered in detail the position of all three devolved countries. Another key difference is that the Holtham Commission comprised three independent experts while the House of Lords Committee was composed of a set of peers many of whom have had extensive experience of government including a former Chancellor of the Exchequer, Nigel Lawson, and two former Secretaries of State for Scotland, Michael Forsyth and Ian Lang. The differences in composition and approach mean that consideration of those findings and recommendations where the reports are in agreement should carry that much more weight.
The Lords committee concludes that ‘the Barnett Formula should no longer be used to determine annual increase in the block grant for the United Kingdom’s devolved administrations.’ The Barnett Formula takes no account of relative needs of any of the devolved administrations and a new system, which allocates resources based on an explicit assessment of relative need, should be introduced. The precise details of a new system are not defined in the report but there are some broad-brush indications of the approach that might be taken.
Importantly, the Lords report proposes that the process of reviewing the grant allocations and the range of functions needed to make the new system work should be carried out by a new independent expert body called the UK Funding Commission. The Commission would determine new baselines: this would address one of the fundamental weaknesses of the current system, which carries forward past misallocations of funds on a cumulative basis. The Committee recommends that a periodic review of the baselines, every five years, should be carried out by the Commission. The Commission would undertake an assessment of relative need, undertake periodic review, and collect and publish information on an annual basis. While the Commission should be advisory its advice would be published and its recommendations laid before the House of Commons for approval. Thus, there would need to be a very strong case for the recommendations of the Commission to be rejected by the government of the day.
Under the current arrangements the block grant is made to the Secretaries of State of the devolved territories and they then pass on the monies (after deducting the costs of running their own offices) to the devolved administrations. The Committee recommends that future grants be payable directly from the United Kingdom Government to the consolidated fund of each devolved administration. This is a welcome proposal and would be a further step in recognising the position of the devolved administrations as being the governments of their respective countries in the case of those matters that are devolved.
Unlike the Holtham Commission the House of Lords Committee does not attempt to quantify any possible funding shortfall or over provision for Wales but does draw the tentative conclusion that on the basis of their initial analysis ‘Scotland has a markedly lower overall need that Wales and Northern Ireland in comparison to England’.
The Committee recommends that the arrangements they propose will need to be embodied in statute, at least in general outline. The legislation should contain provision that the quinquennial reviews recommended by the Committee indeed take place. This is another welcome recommendation which will end the current practice where to quote the Holtham Commission the current arrangements are a ‘fudge’. They are also subject to ‘arbitrary decisions made by the Treasury’ (Calman report).
Taken together the Holtham and House of Lords reports provide a powerful critique of the current funding arrangements and point the way forward to a much more satisfactory funding regime in the future. The question now is whether there is the political will to make the required changes.
Eurfyl ap Gwilym is an IWA Trustee.
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Welsh public spending’s answer: 114
James Foreman-Peck reflects on fairer public spending across the UK:
Much of the United Kingdom appears unaware of the valuable answer, ‘114’, published last week. ‘114’ was the answer to the following question posed in the Holtham Commission’s interim report: “If we use English ‘needs’ formulas for health and other public spending, how much more public spending per head would Wales need in the block grant, assuming English spending is 100?” The commission note for 2010-2011 that the actual block grant, or Barnett payout, at 112 will be rather less than calculated spending needs. Somewhat oddly (and unnecessarily) the Commission focuses on Gross Value Added per head (GVA) in their initial discussion of deprivation in Wales (on p.39). It is odd because GVA is a production idea and so at best is an indirect indicator of deprivation. Low productivity and low labour force participation are not necessarily signs of deprivation in the population. For instance the Republic of Ireland has comparable low participation rates but this is not usually taken to show that today’s Irish are impoverished.
More conventionally, family income, adjusted for the purchasing power of money, and after tax and transfer payments from (the UK) government, would be taken as a measure of well being or deprivation in Wales, compared with elsewhere in Britain. But this leads to a rather different result from GVA per head. Whereas Welsh GVA per head is 25 percentage points below the UK average, Welsh household disposable income in 2006 was only 11 percent lower. Adjusted for the lower Welsh prices, Welsh ‘real’ incomes are then approximately only 4 percent lower than the UK average household disposable income. Not only does ‘real income’ give a very different impression of Welsh deprivation than does GVA, it also raises important questions about why the Holtham Commission’s needs indicator is so different from Welsh real household income.
As a quick fix for the problem identified by their Welsh ‘needs’ calculation, the Commission propose abandoning the Barnett formula for the block grant, with its tendency to drive Welsh spending per head down to English levels. Instead all English relevant increases in public spending per head should now be multiplied by 1.14 to get the Welsh allocation. My recommendation for a ‘relaxed Barnett’ to the House of Lords Select Committee enquiry into the formula, to match percentage increases per head, achieves a similar effect but without reliance on precise needs calculations.
In the longer term the Holtham Commission advise a needs-based formula for allocating the block grant, observing that other countries manage to do agree such a procedure for devolved administrations and therefore the UK should be able to. One reason the UK may not rise to the occasion, is that, as massive public spending cuts become necessary, creating a new ‘needs formula’ quango would be politically ‘courageous’. Another reason for doubting the UK will develop a needs formula is that the matter is not widely considered a political priority. The devolved administrations account for only about one sixth of the UK population, and Wales does not have the most politically influential of these governments.
Secretary of State for Wales, Peter Hain’s initial reaction to the Commission’s report is perhaps indicative of the attention Whitehall intends to devote to Wales. ‘..spending in Wales compares well with comparable English regions, and .. existing funding levels are reasonable… We want to keep this issue under consideration..’ This consideration is likely to include a desire to deal with the devolved governments altogether, not just Wales.
Unfortunately, a replication of the Holtham Commission’s work for Scotland and Northern Ireland is unlikely to show that revision of the Barnett formula is a pressing matter for them. Perhaps the best hope for Wales is that the Calman Commission’s recommendation for Scotland of devolved tax powers are accepted and bundled with a ‘relaxed Barnett formula’ for all the devolved governments’ block grants. This would have the appeal of simplicity and encouraging devolved spending responsibility. True Scotland and Northern Ireland will continue to receive more public spending than they should, and Berwick upon Tweed will remain miffed by its free spending neighbour across the border. But the forces that have maintained these disparities for decades will not disappear over night and politics is the art of the possible.
Prof. James Foreman-Peck is Director of the Welsh Institute for Research in Economics and Development at Cardiff University.
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Will Britain survive beyond 2020?
John Osmond enters into a debate with Conservative AM David Melding’s advocacy of federalism as a solution to Britain’s constitutional instabilityIt is an expression of how far we have travelled in Wales since the creation of the National Assembly in 1999 that the most developed thinking on how we should grapple with the next phase of our constitutional journey is coming from within the Welsh Conservative Party.To be sure, David Melding, Conservative AM for South Wales Central and author of the IWA’s new book Will Britain Survive Beyond 2020?, is hardly representative of mainstream Conservative thinking. Although his approach is characterised by a deep attachment to sustaining British unity and values, he is decidedly moderate on social issues and strikingly radical in his constitutional ideas. On the constitution he argues that if Britain is to have a secure future then the identity of what he calls the ‘Home Nations’ must be acknowledged and supported in a way that allows them to share sovereignty with the British level. In short, he makes a powerful case for a British federation:
“For Britishness to remain coherent it must now accommodate the explicit political character of Wales, Scotland, Northern Ireland and perhaps sooner than we think, England. A great but dormant truth is reasserting itself. The Home Nations are sovereign entities. At the moment they choose to be part of the British state. Long may it continue. But let no one be fooled that this allegiance is inevitable. Britain might not survive beyond 2020. The best way to preserve Britain as a multinational state is to accept that the UK can no longer be based on tacit consent but requires a new settlement. That settlement will need to be federal in character so that the sovereignties of the Home Nations and the UK state can be recognised in their respective jurisdictions.”
He then proceeds to deal systematically with the various objections that can be made to federalism, especially in the British context. The most obvious is the relative dominance of England which, as he points out, has a share of population and wealth about six times as large as Scotland, Wales and Northern Ireland combined. He addresses this problem by appealing to the essentially national character of the units involved:
“Somewhat paradoxically, it is Britain’s multinational nature that makes an asymmetrical federation possible. While England, Scotland and Wales are significantly different in size, they are very similar in terms of their national coherence. Nations may be ‘imagined’ but some are projected more vividly than others. The Home Nations of Britain are almost Biblical in their intensity. Such nationalism would provide strong cultural defences in a federal UK. More formally, a range of constitutional safeguards could also reduce the risk of the domestic jurisdiction of Wales and Scotland being encroached by a UK government. A constitutional court could act as the guardian of national rights. And a reformed House of Lords could contain a disproportionately large number of Celtic members, following the principle established by the American Senate. The strongest safeguard would be a constitutionally enshrined right to secede which would moderate the behaviour of the most diehard centralists intent on assimilation.”
Melding acknowledges that a federal Britain along these lines would break new ground precisely because, unlike nearly all federations elsewhere, it would be made up entirely of national units. Consequently, it would have built-in, as it were, the potential for an eventual break-up of the state. Here he cites the Canadian federation which has Quebec as a major component but yet has still not fractured. He also insists that a continuing emotional attachment to Britishness will itself be a factor in sustaining its integrity.
He acknowledges, too, that it could be argued that federalism would be an artificial imposition and against the traditional, organic, and generally unplanned evolution of British constitutional arrangements. In fact, in this sense it would be distinctly ‘un-British’. However, against this he argues that Britain is developing in a quasi-federal direction in any event:
“It is becoming increasingly clear that what starts in theory as devolution – with an assertion of centrally retained sovereignty – quickly becomes quasi-federalism. The Scotland Act 1998 devolved all legislative power to the Scottish Parliament other than those items listed for exemption, and this firmly established the Scottish Parliament as a quasi-federal institution rather than a grand unit of local government to be altered or overridden at will by Westminster. That Britain’s quasi-federal devolution is not buttressed by a written federal constitution weakens the British state. It is sheer wishful thinking to call this constitutional muddle pragmatic flexibility. There are too many grey areas where devolved administrations can compete for jurisdiction with Westminster – the SNP’s anti-nuclear stance on defence illustrates the danger. To some extent this jostling is found in all federal states; but without a clear constitutional settlement, Britain risks losing the benefits of a more formal federalism with an agreed set of rules and clear boundaries, while retaining none of the certainties of the former unitary state.”
There is undoubtedly an elegance to David Melding’s case for a federal solution to Britain’s devolution dilemmas and, certainly in terms of Welsh political thinking, he breaks new ground. At the same time, in making his case he also makes some heroic assumptions about English attitudes. In essence, he seems to require a separation of civic attachment between the British federal level on the one hand, and the ‘Home Nations’ on the other. Could this be achieved when, as he himself concedes, the components of the federation would comprise such intensely aware national entities?
It can be argued that, to varying degrees, the people of the United Kingdom feel at one and the same time Welsh/Scottish/Northern Irish/English and also British, but it is not clear how these break down in terms of national or civic allegiances. To separate them in relation to parallel political jurisdictions, as is required in Melding’s vision of a federal Britain, would be a novel step, and especially for the English mind. It is not at all clear, for instance, that the English do feel a straightforward duality of identity between feeling at one and the same time both English and British. For the most part is it not the case that the English simply feel English? For them being British may simply be an expression of their essential English identity but in the wider world - as with carrying a British passport, and in relation to institutions such as the British armed services, the BBC, the British Council, and perhaps the ‘British’ monarchy.
Underlying all of this is the absence of any significant ‘independence’ movement in England, for example for an English Parliament. Certainly, in recent times a more salient sense of Englishness has developed, and especially since the advent of devolution in the late 1990s, finding expression for instance in the widespread replacement of the Union Jack by the St George’s Cross in the football stadium. However, this has not been accompanied by any clearly articulated constitutional ambition to establish distinctive English institutions. The Conservative call for ‘English votes for English laws’ in the House of Commons seem driven more by a search for party advantage than any aspiration for fundamental constitutional change.
As to a British federation, where is the evidence that there is a political will amongst the English to federate? The Welsh and, less likely, the Scots may demand it, but the English, and certainly the English political class just do not engage with the discussion, or even the language of the debate. Two examples stand out. One was the fall at the first referendum hurdle of the attempt at devolution within England to create an elected Assembly for the North-East. This was envisaged as the starting point for a rolling programme of devolution throughout England. Had it been successful it might have provided the basis for a British federal structure involving the English regions, although of course it would have entailed the political dismantling of the English nation.
The other example is the on-going debate on reform of the House of Lords. Melding seems to assume that it could somehow be used at least in part as a chamber to represent the federal components of the state in the way that is generally common in federal systems, such as Germany, Australia, and the United States. Yet in all the debates there has been no serious proposal for the House of Lords to evolve as a regional chamber. Indeed, the only case in modern times for a reform of the House of Lords along these lines was been made by the myself, in 1998, in a Fabian pamphlet Reforming the Lords and changing Britain. It was significant that this failed to provoke any debate and sank without trace.
A further constraint on a federal solution is that, ultimately, it would not satisfy Scottish or Welsh nationalist aspirations, which seek international representation, at a minimum within the EU. Yet for a nation to be represented within the EU it has to be independent. Flanders is without doubt the most devolved, regionalised, or federated 'region/nation' within a EU member state. But it simply has no voice in the EU institutions. The position in Belgium is that all three jurisdictions – Flanders, Wallonia, and Brussels - have to agree on a common position for Belgium within the Council of Ministers. If they don't then Belgium simply fails to have a position, which is increasingly the case.
Can it be imagined that a similar restriction could be applied to the representation of a British federation within the EU? That is to say, could a situation be envisaged where Wales, Scotland and England (and perhaps Northern Ireland) would all have to agree before a position was adopted in the Council of Ministers? Even more improbably, could Wales have a veto on a British federation declaring war (which it would certainly have wished for in relation to the Iraq adventure, for instance)? To ask the question provides the answer.
Aside from Scottish or Welsh aspirations, a fundamental question for those who advocate a British federal solution is simply this: are the English ready to face the existential choice of adding British to their English identity in a meaningful, political way, in order to embrace the Celtic periphery in a shared federal constitution? Again, on the face of it, to ask the question provides the answer.
At the same time, two current issues may work in favour of the English acceding to this. One is the apparent Conservative determination to deal with the so-called West Lothian question, in which because of devolution Scottish and Welsh MPs can vote on English domestic matters at Westminster while English MPs cannot vote on Scottish or Welsh domestic policies. The other is if there is an initiative to dismantle the Barnett formula, which distributes funds to the devolved nations. The first might destabilise the Westminster Parliament and the second would raise the question of the distribution of public expenditure within England. Both might lead to an increasing appetite for a federal answer. Yet both remain relatively technical issues and hardly ones calculated to prompt the kind of emotional engagement that would justify such a large-scale constitutional response.
It is one thing to point out the political or existential realities facing those who advocate a federal solution to the constitutional conundrums facing Britain, but quite another to suggest a more plausible approach. The likelihood is that the project will continue for a good while yet along the course already adopted, with gradual, pragmatic and unsystematic adjustments. Wales is likely to follow Scotland in acquiring more fully-fledged legislative powers. Scotland is likely to acquire greater fiscal autonomy. Both developments will nudge Britain more in a quasi-federal direction. But it will be a while, perhaps five to ten years or more, before the British system as a whole is materially affected.
Meanwhile, the essential break in the British system has already been made, simply by the creation of the National Assembly for Wales and the Scottish Parliament, consequent upon the referendums held in September 1997, and also devolution following a referendum in Northern Ireland. These were an explicit acknowledgement of the sovereignty of the people of the entities involved. How that essential sovereignty will be deployed in the different parts of the still United Kingdom in the coming years will be a determining part of the answer to David Melding’s intriguing question, Will Britain Survive Beyond 2020?
John Osmond is Director of the IWA. Will Britain Survive Beyond 2020? is available from the IWA at £11.99 with a 25 per cent discount to IWA members.
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What the Holtham Commission's interim report means
Eurfyl ap Gwilym examines the interim report from the Holtham Commission on funding Welsh devolved government:When Plaid Cymru and Labour entered into a coalition government in the Assembly in 2007 one of the key elements of the One Wales agreement was to sponsor a study of the way the Welsh Assembly Government was funded and to identify possible alternative funding mechanisms including the scope for the Welsh Assembly Government to have tax varying powers as well a greater powers to borrow.
As a consequence of this decision a commission was established under Gerald Holtham with two additional members, David Miles and Paul Bernd Spahn. It was at the outset encouraging to see the high calibre of the team with the combination of public policy and economic expertise, experience of international financial services and deep knowledge of fiscal federalism systems across the world.On 7 July 2009 the commission published its interim report (link to summary report). This first report concentrates on the current funding arrangements (the Barnett formula) and as extending this work will address tax varying and borrowing powers in the second and final report. Whilst recognising the wider context of the UK with devolved parliaments and assemblies in Scotland and Northern Ireland, the commission has concentrated its attention on the funding position of Wales vis a vis England. Given that the driving force behind public spending decisions is the needs of England, which then have a consequential funding effects on Wales through the Barnett formula this is an understandable approach. However this approach, together with the fact that the Commission was established as an initiative of the Welsh Assembly Government, may well reduce its political influence at the UK level where key decisions regarding current and future funding arrangements are made.
The report is over one hundred pages long and contains original research and analysis, as well as information already well known to aficionados of the Barnett formula. A careful review and analysis over the coming weeks and months will be required to extract full value from the report. Chapter 4 seeks to undertake a needs assessment for Wales and is likely to be used as a yardstick when others seek to undertake a similar exercise in the future.
The principal recommendations of the commission are:
1. In the medium term the funding arrangements for Wales should be based on relative need.
2. No further decline in relative funding per head should occur in Wales until a new funding system is in place. This could be achieved in a straightforward way by simply multiplying any positive increments allocated to Wales under the Barnett formula arrangements by 114 per cent.
There are other important recommendations regarding enhancing funding flexibility available to the Welsh Assembly Government, means of reducing the likelihood of future disputes between Cardiff and London and ways of improving transparency. In particular the report calls for the annual publication of information that would enable direct comparisons between Assembly Government expenditure and similar expenditure in England.
The first principal recommendation addresses the central weakness of the Barnett formula: relative funding is not related to relative need. To assess the adequacy of relative funding to Wales the commission assesses need in Wales compared with England by adopting, as closely as possible, the ways in which intra-England public funding is allocated according to need. This leads the Commission to the conclusion that, even on a very conservative assessment, Wales is under-funded when compared with England. It is for this reason that the report calls for an end to Barnett convergence: the characteristic of the formula which over time drives expenditure per capita in Wales down to the level in England irrespective of the relatively greater needs of Wales. The report estimates that unless this is done spending on devolved services which will be 112 per cent of the England average by 2010-11 will decline to 107 per cent over the subsequent decade.
This call to ‘freeze the squeeze’ is particularly pressing because the Commission estimates that the cumulative under funding of Wales over the next decade will total £5.3 billion under a low spending growth scenario (very likely in my view) and £8.5 billion under the historic average spending growth scenario (much less likely given the state of the public finances). Given that the forecasts of the current government in the 2009 Budget Red Book imply a cumulative cut of £2.2 billion in the Wales Departmental Expenditure Limit between 2011-12 and 2013-14 (see my earlier blog) the case for stopping further Barnett convergence is a matter of urgency.
The work of the Holtham Commission needs to be viewed in the broader context of what else is going on in the field of devolved funding. In Scotland the Calman Commission has come out with a set of recommendations which include retention of part of the block grant as well as giving the Scottish parliament greater income tax varying powers. Calman does acknowledge the drawbacks of the Barnett formula and in particular both the fact that relative funding is not related to relative need and that many allocations are the subject of arbitrary decisions within the Treasury. Calman avoids being drawn into recommending a replacement for Barnett, claiming that it is outside the scope of their work. However it would be a mistake to assume, as some have, that favouring a block grant as part of the Calman approach is the same as favouring the retention of Barnett. A needs related approach can readily be incorporated into a block grant the value of which is derived from relative need.
At the UK level, thanks to pressure from Lord Barnett, a House of Lords committee is currently examining the Barnett formula. The committee chaired by Ivor Richard, numbers amongst its members a former Chancellor of the Exchequer (Nigel Lawson) and two former Secretaries of State for Scotland (Ian Lang and Michael Forsyth). It is clear from their public hearings that this heavyweight committee accepts that there is no intellectual foundation to the Barnett formula and are puzzled that it has been allowed to be in force for so long. After many sessions the only witnesses favouring Barnett were the Treasury who defended it on the grounds of administrative convenience and the three territorial secretaries of state. Whilst it was perhaps understandable that the secretaries of state for Scotland and Northern Ireland favoured Barnett (it is widely recognised that those two countries get a good deal) it was surprising that the then Secretary of State for Wales, Paul Murphy, defended the status quo. It certainly appears that the House of Lords Committee will come out with a report condemning Barnett and proposing, at a minimum, approaches to replace it with a needs based formula. Given the valuable analyses in the Holtham Interim Report it is to be hoped that this will help inform the House of Lords’ deliberations.
What will come of all of this work by the three committees/commissions? There is a real danger that little will change. The Treasury is content with the status quo because it makes life easy for them and they can often continue to exercise arbitrary power in allocating funds when it suits them. Holtham gives the example of the London Olympics as an example of this. There is little pressure from Scotland because it is generally believed that they do well under Barnett. Lord Forsyth was open with his colleagues in the Lords in claiming that during his time as Scottish Secretary he as able to use the threat of the SNP as a bargaining counter with the Treasury. In the early 1980s the Treasury sought to reduce the block grants to both Scotland and Northern Ireland (but not apparently to Wales) by instigating a fresh needs assessment but were forced to ‘retire hurt’ after strong rebuffs from the Scottish and Northern Ireland Offices. In any event Northern Ireland is always regarded by the rest of the UK as a special case and the fact that public expenditure there is very high is taken as confirmation of this.
What of Wales? There is little doubt that any decision to change the current funding arrangements will require considerable political pressure and this will need all the political parties in Wales to work together for the common good. Trying to get change will be made more difficult by the bleak outlook for public spending across the UK over the coming years. Perhaps the position and political weakness of Wales was best summed up by Lord Rooker, a member of the House of Lords Committee. Rooker, who as Jeff Rooker was an MP for the English Midlands (Birmingham, Perry Bar) for many years, said at a committee hearing: ‘The Welsh are the big losers’, ‘The Secretary of State (as was) [Paul Murphy] did not quite appreciate how much they were losers under the status quo’. ‘It is amazing that they are not up in arms about it’. Let us hope that the Holtham Commission report will be our call to arms.
Dr Eurfyl ap Gwilym is a trustee of the IWA.
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